Review, Compilation, and Preparation of Financial · PDF fileAmerican Institute of CPAs...

American Institute of CPAs
Review, Compilation, and Preparation of
Financial Statements
DISCLAIMER: This publication has not been approved, disapproved or otherwise acted upon by any senior technical committees of, and does not represent an official position of, the American Institute of Certified Public
Accountants. It is distributed with the understanding that the contributing authors and editors, and the publisher, are not rendering legal, accounting, or other professional services in this publication. If legal advice or other expert assistance is required, the services of a competent professional should be sought.
Copyright 2011 by American Institute of Certified Public Accountants, Inc. New York, NY 10036-8775 All rights reserved. For information about the procedure for requesting permission to make copies of any part of this work,
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Speaker Biography
Michael P. (Mike) Glynn is a Senior Technical Manager in the AICPA Audit and Attest
Standards Team. In this capacity, Mike serves as the staff liaison to the Accounting and
Review Services Committee (ARSC). In addition, Mike supports the activities of Auditing
Standards Board (ASB) and its subcommittees by assisting members in drafting and
deliberating authoritative professional standards and interpretations.
Prior to joining the Audit and Attest Standards Team, Mike was a technical manager in the
AICPA SEC Practice Section (SECPS). In that capacity, Mike supported the Quality
Control Inquiry Committee (QCIC) by participating in deliberations of QCIC cases and
participating in meetings with the Securities and Exchange Commission regarding the
SECs oversight of the self-regulatory process. Prior to joining the SECPS, Mike was a
technical manager in the AICPA Professional Ethics Division.
Prior to joining the AICPA in April 1998, Mike worked at Ernst & Young LLP in New York.
Mike also serves as a member of the New York State Society of CPAs Accounting and
Review Services Committee.
Mike is a graduate of Pace University with a BBA in public accounting.
2

DISCLAIMER
Views expressed by AICPA employees are expressed
for purposes of deliberation, providing member
services and other purposes exclusive of practicing
public accounting. Views expressed by AICPA staff do
not necessarily represent the official views of the
AICPA unless otherwise noted. Official AICPA
positions are determined through certain specific
committee procedures, due process and deliberation.

Todays Objectives
Discuss SSARS No. 21. Discuss the changes to practice expected as a result of the
issuance of SSARS No. 21 including significant revisions to
the requirements for financial statement preparers.
- Understand the reasons for the changes
Slide 4

SSARSs Clarity Project:
Overview

Clarity Project Goals
Same as ASBs Clarity Project Goals
Address concerns over length and complexity of standards
Make standards easier to read, understand and implement
Lead to enhancements in engagement quality
Same format and drafting guidelines
No inclusion of special considerations for smaller, less complex
entities or governmental entities
SSARS No. 21 represents the ARSCs efforts to
clarify and revise the standards for reviews,
compilations, and engagements to prepare financial
statements

Statement on Standards for Accounting and
Review Services - SSARS No. 21
Effective for financial statements for periods on or
after December 15, 2015
Early implementation is permitted
7

SSARS No. 21
Supersedes all existing AR sections
except for AR Section 120, Compilation of
Pro Forma Financial Information, which is
expected to be exposed for public
comment in clarified format in 2015 along
with a proposed standard on
assembly/compilation of prospective
financial information.
Prospective financial information is currently
codified in Attest Standards
8

Significant Changes to
Standards for Financial
Statement Preparers

Submission of Financial Statements
AR section 80 applies when an accountant is
engaged to report on compiled financial statements
or submits financial statements to the client or to
third parties.
Submission is defined as prepare and present
Determining Whether Financial Statements Have
Been Prepared by the Accountant
Cloud computing and other applications have made it difficult to
determine who (or what) has prepared the financial statements:
- The accountant?
- Management?
- The computer application?

Submission of Financial Statements
AR-C section 80 applies when an accountant is
engaged to perform a compilation service.

Financial Statement Preparation
Recently issued standards clarify that preparation
of financial statements is a nonattest service,
consistent with the guidance in;
AICPA Code of Conduct clarified Interpretation 1.295 (effective
12/15/14)
- Previously ET Interpretation 101-3
The 2011 version of Government Auditing Standards
12

SSARS No. 21

SSARS 21 - Format
SSARS No. 21 is formatted into four separate
sections:
Section 60, General Principles for Engagements Performed in
Accordance With Statements on Standards for Accounting and
Review Services
Section 70, Preparation of Financial Statements
Section 80, Compilation Engagements
Section 90, Review of Financial Statements
These sections will be codified with the prefix AR-
C to denote them from the extant AR sections.
14

Section 60 - General principles for SSARS
engagements
Replaces AR Section 60, Framework for Performing
and Reporting on Compilation and Review
Engagements.
In addition to complying with preparation,
compilation and review sections the accountant
must comply with the general principles in Section
60.
15

Section 60 - General principles for SSARS
engagements
Section 60 includes requirements and guidance with
respect to:
Ethical requirements
Professional judgment
Conduct of the engagement in accordance with SSARSs
Engagement level quality control
Acceptance and continuance of client relationships and
engagements
16

Section 70 Preparation of Financial
Statements
Intended to be short and easy to apply Only 22 requirement paragraphs and 19 application paragraphs
Applies when the accountant is engaged to
prepare f/s but not engaged to perform an
audit, review, or compilation on those f/s Does not apply when the accountant has been engaged to
merely assist in preparing financial statements or when the
accountant prepares financial statements as a by-product of
another engagement

Statements
Does not apply when the accountant
prepares financial statements: Solely for submission to taxing authorities,
For inclusion in written personal financial plans prepared by the
accountant,
In conjunction with litigation services that involve pending or
threatened legal or regulatory proceedings, or
In conjunction with business valuation services.
Professional judgment will need to be applied as to
when the accountant is engaged to prepare financial
statements.

Statements
Does not require the accountant to consider
whether he or she is independent
Requires an engagement letter signed by
both the accountant and management/those
charged with governance
Can be applied to f/s with or without
disclosures

Statements
If the financial statements omit substantially
all disclosures disclose the omission in the
financial statements
If the financial statements contain a known
framework departure disclose in the
financial statements May be on the face of the financial statements or in a note
Do not prepare financial statements if omission of disclosures or
other known framework departures are done to mislead users

Statements
Report is not required even if financial
statements are expected to be used by a
third part

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